Guest essay by Eric Worrall
The British renewables industry is horrified at the latest UK budget, which has slashed the green climate change levy, and provided a mild tax cut for faltering North Sea oil extraction businesses.
According to The Guardian;
George Osborne has infuriated green energy producers and campaigners with a £910m-a-year raid on the renewable energy sector by changing a climate change levy (CCL) at the same time as providing more fiscal help for North Sea oilfields.
RenewableUK, the lobby group, said the changes would cost green energy producers around £450m in the current financial year, and up to £1bn by 2020-2021.
The move hammered the share price of power generator Drax which is in the process of converting stations from burning coal to burning wood pellets. The company lost more than a quarter of its stock market value as it said the move would cost it £30m this year and £60m in 2016.
Caroline Lucas, the Green party MP, described the budget as a “serious blow for the fight against climate change”, while Greenpeace said it showed the chancellor is out of step with the times.
The Telegraph, another UK newspaper, provides more detail on the “fiscal help for North Sea oil production”:
North Sea oil explorers and producers were handed little in the way of a boost by the Chancellor in the budget despite the industry suffering from falling prices.
Oil prices currently below $60 per barrel have hit the UK’s main petroleum producing basin hard but George Osborne had little to offer in the emergency budget beyond the incentives he introduced at the end of the last parliament.
In March Mr Osborne unveiled measures worth £1.3bn over five years aimed at boosting flagging North Sea oil production by 15pc by the end of the decade.
The effective tax rate on production from older oil and gas fields was reduced from 80pc to 75pc, while on newer fields it would be cut from 60pc to 50pc.
The UK joins a growing list of European nations which are significantly scaling back their green energy schemes, some of them retroactively.
Despite strident green rhetoric in the leadup to Paris, Greece, Spain, Germany, Italy, Northern Ireland, Portugal, Poland, Bulgaria, The Czech Republic, Estonia, Latvia, probably other European nations have all slashed state aid for renewables, some of them more than once.
Greens regularly try to talk up the alleged “risks” associated with investing in fossil fuel energy. In my opinion, owning an investment in an industry, where a quarter of your investment can be wiped out at the stroke of a politician’s pen, because your business model depends on the generosity of cash strapped governments, is far more precarious.